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CRFB Reacts to Capital Gains Tax Proposal

Recently, a number of proposals have emerged to modify the capital gains tax – either by legislation or through administrative action – to apply only to gains above inflation. Analysis using the Penn Wharton Budget Model has concluded this change would cost about $100 billion over a decade. Maya MacGuineas, president of the Committee for a Responsible Federal Budget, said the following:

It’s hard to look at current trends and conclude we need yet another deficit-financed tax cut. We’re headed toward trillion-dollar deficits next year, and we just enacted a massive tax cut less than a year ago.

There are certainly some arguments in favor of indexing capital gains to inflation as part of a broader reform package. But there is absolutely no argument for adding another $100 billion to the national credit card – certainly not through administrative fiat.

If policymakers do choose to index capital gains, they could more than offset the costs by, for instance, ending the preferential treatment of capital gains and dividends and indexing other parts of the tax code to inflation as well. This is a conversation worth having.

Meanwhile, we need a plan to slow the unsustainable growth of our national debt, not add to it.

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For more information contact Patrick Newton, press secretary, at newton@crfb.org.